Impairment Tests

An impairment test is a review to be performed once annually to determine whether non-current asset positions not subject to scheduled depreciation have suffered impairment. This relates not only to goodwill capitalised as part of business acquisitions but also intangible assets such as trademarks, technologies, customer bases or patents.

Impairment tests are conducted pursuant to the accounting standards US-GAAP (two-step test) and IAS/IFRS (one-step test). In both cases, a prognosis of the expected, future cash flows is required in the form of a financial projection. A discount rate must be determined for purposes discounting these cash flows.

The fair value determined in this manner (“fair value less cost to sell” or “value in use”) must be compared to the book value of the asset and, if applicable, any resulting depreciation amount must be computed as an impairment loss.